Breach of Contract and Remedies. At the conclusion of this lesson, the student should be able to:...
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Breach of Contract and
Remedies
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At the conclusion of this lesson, the student should be able to: Determine a breach of contract Explain the various remedies for breach of
contract Differentiate between the different remedies
for breach of contract
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Overview Contract
Agreement, Consideration, Capacity, Legality Breach
Non-performance Failure to perform an absolute duty required
under the K Remedy
Relief provided to the innocent party
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Breach of Contract What is it? How does it occur?
be sure to be able to distinguish between a breach and situation where party says other is breaching when in actuality a defense has been raised to enforcement
e.g., Statute of Frauds, Genuineness of Assent
Failure to perform agreement, or failure of consideration
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Remedies... At Law
classic compensation for injury limited to
land items of value money
In Equity based on principles of
justice and fairness relief provided through
specific performance injunctions rescission and
restitution
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Remedies at Law Damages... RM.RM.RM.RM Compensation for loss of the Benefit of the
Bargain Most common remedy “... innocent party to be placed in the position
they would have occupied had the contract been fully performed...”
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Four Types of Damages
Compensatory
Consequential
Punitive
Nominal
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Compensatory Damages Compensation for the loss of the benefit of
the bargain Injuries must be actually sustained Must arise directly from the loss of the
bargain Generalized examples
Sale of Goods contract Land contract Construction contract
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Compensatory Damages
Sale of Goods contract
e.g., Seller Breach
Benefit of Bargain?
Twenty RM
RM100
RM80
Market Price
K Price
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Compensatory Damages
Sale of Land contract Best remedy: Specific Performance.... why?
Because each parcel of land is unique... But what if land has been sold after breach? Will RM damages be enough if the new
owner won’t sell?
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Compensatory Damages
Construction Contract Breach by owner can occur at essentially
three different times Before (profits) During (profits and costs incurred) After (Contract price + interest)
Event of Contractor Breach? all costs by owner to complete construction...
w/o waste
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Four Types of Damages Compensatory
Consequential (Specials)
Punitive
Nominal
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Consequential Damages Key issue
FORESEEABILITY must know or have reason to know as by special
relationship Defendant must be able to reasonably foresee
injury as a probable result.... injury or damage?
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Four Types of Damages
Compensatory
Consequential
Punitive
Nominal
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Punitive Damages Inconsistent with contract theory
contract as a civil relationship between two parties
business has its own way to punish... ... are awarded usually only in connection
with torts
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Four Types of Damages
Compensatory
Consequential
Punitive
Nominal
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Nominal Damages Technical injury only No actual damages suffered
but has an injury been suffered? Typically RM1
what about lawyers fees? “A matter of principle”
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Mitigation of Damages “...cause to be less harsh...” injured party must use reasonable means to
mitigate loss some examples
employment rental apartments
what are “reasonable means”... what is an “acceptable tenant”... etc.
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Liquidated Damages Sum certain... calculable... determined...
specified amount Cannot be punitive... as already noted
penalties have no place in contract law The Test:
When contract entered into, was it apparent that damages would be difficult to estimate in event of breach?
Was amount set reasonable and not excessive? Estimation of damages? Reasonable?
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Construction Contract example:
California earthquake destruction of major public roads
Contract to rebuild Per day costs of road closing Contract awards extra RM for early completion Contract payment decreases for late
completion
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Remedies... At Law
classic compensation for injury limited to
land items of value money
In Equity based on principles of
justice and fairness. relief provided through
specific performance injunctions rescission and
restitution reformation
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Equitable RemediesUsually only awarded if legal remedies are inadequate
Specific Performance
Injunctions
Rescission & Restitution
Reformation
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Specific Performance
Contracts don’t usually provide a good case for the granting of this remedy major exception: Contract for the sale of land
because of uniqueness of parcel
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Specific Performance Appropriate where the legal remedy (RM
damages) is inadequate “... an order to perform what was promised...” Injured party gets what was agreed to under
the contract Why is SP not usually appropriate where the
dispute centers around the sale of goods?
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Injunctions
“... forbids defendant to do some act... which he is threatening or attempting to commit, or restraining him in the continuance thereof, such act being unjust and inequitable, injurious to the plaintiff, and not as such as can be adequately redressed by an action at law...”
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Injunctions Not a typical remedy in contract disputes Difference between positive and negative Some use in a negative fashion in personal
services contracts e.g., Contract dispute between a performing
artist and promoter... prohibition on performing in same area for a different promoter
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Requirements for an Injunction
Remedies at law inadequate, thus causing irreparable harm...
Plaintiff must demonstrate at least a reasonable likelihood of success at trial
Threatened injury to the plaintiff outweighs the threatened harm the granting of the injunction may inflict on the defendant
Whether by granting the preliminary injunction the public interest would be disserved
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Rescission and Restitution Purpose of rescission is restitutionary
a dissolution or “undoing” of the contract... restoration of the parties to their positions
before the contract was entered into “status quo ante”
If not mutually decided upon, the rescission must be grounded in something that makes the contract voidable Example: genuineness of assent problems
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Remember Genuineness of assent…..
Even if all the elements of a contract are present according to the objective theory of contracts, a contract may be unenforceable if there is not Genuine Assent by the Parties. If assent is not genuine, the contract can be avoided by the party whose assent was not genuine
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Contracts That May Lack Genuineness of Assent Contracts Entered Into on the Basis of
Mistakes Misrepresentation Undue Influence Duress
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Rescission and Restitution Unilateral
rescission must be grounded in something that makes the contract voidable
What would these be?
Mutual no need to have a GOA problem is there a need for it to be completely
executory?
Restitution is payment ordered by a criminal court after the offender has been found guilty. Civil damages are ordered when someone has won a lawsuit in civil court.
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Difference between Mutual & Unilateral Rescission One discharges the contract the other is available as a remedy for breach
of contract
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Reformation
Another Equitable Remedy... Differs from R&R most significantly in that it
does not try to undo the contract... ... but rather attempts to reform, correct or
modify the contract so that it accurately reflects the agreement of the parties
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Reformation
Plaintiff must show by “clear and convincing” evidence that the parties had reached agreement on a term and that because of a mutual mistake (or unilateral mistake + misconduct by the other) the term wasn’t included. e.g., “scrivener’s error”- A clerical error in a
legal document